This is in stark contrast to strong recoveries in the UK and US and BAML has been unimpressed by the ECB’s attempts so far to see off the threat of deflation and get the Eurozone economy growing.
It said Draghi has sounded ‘mildly dovish’ and said nothing that we did not know already yesterday. The bank noted that there were some significant moments however with Draghi seeming to put more emphasis on geopolitical risks, mentioning “QE” explicitly for the first time and reporting that work on the ABS measures had intensified.
The worry as BAML sees it though, is that while economic data will ultimately force the ECB to take stronger action it may prove to be too little too late and hence has downgraded its estimate.
Another factor weighing on the Eurozone’s prospects is the weaker than expected performance of Italy’s economy, BAML said. The third largest economy in the single currency area dipped back into recession this week with a 0.1% contraction despite most forecasters expecting economic growth of 0.2% to be reported.
The other big economies using the Euro are also presenting reasons to be concerned in BAML’s view. German industrial production fell 0.5% year-on-year in June and industrial orders fell 3.2%.
France’s trade deficit widened further in June, while Spanish industrial production data also missed expectations, falling 0.8%, BAML said.
